RIPEC: Historic tax credit could fuel economy, development

THE TEMPORARY reauthorization of the state’s Historic Preservation Investment Tax Credit could stimulate the economy and foster job creation and development, according to a R.I. Public Expenditure Council report released Thursday. For a larger version of this chart, click HERE.

PROVIDENCE – The temporary reauthorization of the state’s Historic Preservation Investment Tax Credit could stimulate the economy and foster job creation and development, according to a R.I. Public Expenditure Council report released Thursday.

According to the report, as Rhode Island’s economy begins to recover, the state will be faced with two choices – undoing structural changes that were made in response to the recession or taking an investment-based approach to the budget.

“While RIPEC believes that the state should not take any actions that will contribute to its structural deficit, historic credits from abandoned projects may allow for a targeted, short-term economic stimulus,” said a news release announcing the report.

“There are many intangible benefits of historic preservation, such as preservation of culture and community and the aesthetic sensibilities of preserving architecturally significant buildings,” said the RIPEC report, adding that historic preservation conveys economic benefits as well as historical ones.

Preservation costs may be lower than replacement costs and designation as a historic place may increase property values, stimulating economic growth.

“However, historic rehabilitation also carries costs,” said the report. … “In order to mitigate these costs, historic structures tax credits provide an economic incentive for private-sector investment in the rehabilitation of historic properties.”

The RIPEC report says that allowing new developers to apply for abandoned credits could provide a “much-needed boost” to an economy that may not be robust enough to support development for commercial properties without the credit.

Temporary reinstatement of the Historic Preservation Investment Tax Credit would also allow for an evaluation of how a full reinstatement of the credit could stimulate economic activity and job creation in the Ocean State.

“In the long-term, Rhode Island may benefit from full reinstatement of the credit; however, this decision should be a part of an overall review of the state’s tax policy,’ said the RIPEC release.

The council warned against full restoration of the tax credits without due diligence, saying that the state must consider the structure of the credit, including its value, per project or statewide caps and carry- forward periods.

Comments

Nobody thinks about the other side of tax credits... how the cash jumps out of the Department of Revenue's tax collection window when they are presented by "who knows who." Provisions are hardly ever made in the budget to absorb this revenue loss. Then when the credits become ripe and are about to be presented the state floats a bond to pay for them. It would be much better to float the bond up front and manage the development efforts than hand out tax credit candy with no control over who does what with the money.

Here is a partial current EDC pipeline of bond floatations from the FY-2013 (current) state capital budget. There are some smaller items that I did not bother with because I hit $300 million with just those listed below. They include $140 million in borrowing to pay for past historical tax credits. Double this amount to pay the debt service. This is in addition to a prior bond that EDC has already set up.

This baloney must end with the 38 Studios crash.

The non-RIAC bonds are considered to be "tax-supported debt." RIAC debt is mainly supported by cost sharing agreements with airlines. Details are only discussed behind closed doors.

(11) FY 2012 includes $42.0 million for the purchase of I-195 land by EDC.

(12) FY2013 includes $40.0 million for Historic Tax Credit bonds.

(13) FY2014 includes $35.2 million for Historic Tax Credit bonds.

(14) FY2015 includes $75.0 million for Historic Tax Credit bonds.

RIAC Glycol Plant $23.2 million EDC Bond:

RIAC Safety and Runway Extension $91.3 million will be funded with RIAC bonds and short term borrowings.

RIAC Safety improvements coming up this year: $25,000,000 included in the above $91.3 million. EDC approved the inducement resolution for this $25 million on March 26, 2012.

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